In comparing governance practices at Fortune’s “most admired” and “least admired” companies for Harvard Business Review, Yale management professor Jeffrey Sonnenfeld found little difference in board performance due to percentage of independent directors, financial literacy of audit committee members, or amounts of stock-based compensation.
Sonnenfeld suggests that what makes great boards great is not the structure in which they operate, but the culture. One S&P 500 director describes the ideal board culture as one that “…invites different opinions. It needs to have constructive disagreement and not just a stamp of approval.”Effective boards constructively challenge company management and each other as they assess the workings and plans of the company.
In addition to constructive dissent, other characteristics of effective board cultures include trust, candor, open communications within the board and a broader set of company leaders beyond the CEO level, individual accountability, and an appetite for self-evaluation and improvement. Passively listening to the traditional stream of presentations from the management team is no longer enough to fulfill board responsibilities.
What do you think?
For more information, see Sonnenfeld’s complete publication: What Makes Great Boards Great (PDF)